{"id":31442,"date":"2020-04-27T13:39:13","date_gmt":"2020-04-27T08:09:13","guid":{"rendered":"https:\/\/enterslice.com\/learning\/?p=31442"},"modified":"2022-09-05T16:12:54","modified_gmt":"2022-09-05T10:42:54","slug":"an-analysis-on-memorandum-of-association-under-the-companies-act","status":"publish","type":"post","link":"https:\/\/enterslice.com\/learning\/an-analysis-on-memorandum-of-association-under-the-companies-act\/","title":{"rendered":"A Critical Analysis on Memorandum of Association under the Companies Act, 2013"},"content":{"rendered":"<p class=\"has-drop-cap\">A company is made when a certain group of people come together to achieve a particular objective. Usually, such an objective is commercial in nature that allows them to make financial profits. There are a number of steps that must be followed to form a company. An application is filed with the Registrar of Companies (ROC), and that application is enclosed along with a number of documents. One such <strong>essential document<\/strong> that is to be submitted with the application is the Memorandum of Association. In this article, we shall have a complete review of the various aspects of the Memorandum of Association (MOA), including its objective, features and key contents. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Meaning of Memorandum of\nAssociation<\/h2>\n\n\n\n<p><strong>Memorandum\nof Association (MOA) means the legal document which spells out the prime reason\nfor a company&rsquo;s incorporation. &nbsp;An MOA\nspecifies the powers of the company and the conditions that determine its\nworking<\/strong>.\nThe document contains the rules and regulations that regulate and governs the\ncompany&rsquo;s relations with the people on the outside.<\/p>\n\n\n\n<p><strong>It is a\nmandatory legal document that defines the scope of the operations of a company.\nA company cannot function beyond the scope or the terms of the document<\/strong>. In case a company works\nbeyond the scope of the document, then such work shall be ultra vires act and\nwill be considered void. <\/p>\n\n\n\n<p>The Companies Act 2013 defines the\nmeaning of MOA in section 2(56). It says that the Memorandum means two things\n(a) the Memorandum of Association of a company originally framed or (b) as\naltered from time to time in pursuance of any previous company law. The whole\nstructure of the company is specified in the MOA. It can be noted that the MOA\nis also a public document that means if a person wants to enter into any\ncontract with a company, then he or she can pay the requisite fee to the\nRegistrar of companies and thereafter obtain the MOA. The memorandum document\nshall contain all the details of the company.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Significance of the Memorandum\nof Association<\/h2>\n\n\n\n<p>The significance and the importance of the MOA can be deduced from the fact that without such a legal document, a company cannot be formed. All companies formed under the Companies Act in India must have the MOA. It applies to all kinds of companies. The MOA governs the relationship between the company and its stakeholders. It is an essential document for the registration of a company. The Memorandum of Association and the Articles of Association should be signed by the subscribers and filed with the Registrar for the <strong><a href=\"https:\/\/enterslice.com\/company-registration\">incorporation of a company<\/a><\/strong>.<\/p>\n\n\n\n<p>In addition to this, it allows the\nshareholders to understand the company before buying its shares. The MOA helps\nthem to ascertain the capital they should invest in the company. The document\nprovides access to information to all the stakeholders who are looking to associate\nwith the company. <strong>Therefore if you are\nlooking to enter into a contractual relationship with the company, then you may\nrefer to its MOA in order to gain knowledge about the company<\/strong>.<\/p>\n\n\n\n<p><strong>A Memorandum\nof Association is called the charter of the company because of its key contents\nthat include the details of the company and its members along with their\nliabilities<\/strong>. Thus, one can imagine why such importance is given to this document. It\nis a crucial document in the registration process as well, without which the\ncompany cannot be incorporated.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Different Forms of Memorandum\nof Association<\/h2>\n\n\n\n<p>The Companies Act 2013 under section\n4(5) says that a memorandum must be in accordance with the forms mentioned\nbelow as provided in different tables depending upon the type of company. A\ncompany is required to choose from the table applicable to it.<\/p>\n\n\n\n<ul><li>Table A- shall apply to a\ncompany limited by shares.<\/li><li>Table B- shall apply to a\ncompany limited by guarantee and not having a share capital.<\/li><li>Table C- shall apply to a\ncompany limited by guarantee and having a share capital.<\/li><li>Table D- shall apply to an\nunlimited company which doesn&rsquo;t have a share capital.<\/li><li>Table E- shall apply to an\nunlimited company having a share capital. <\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">What are the key contents of the\nMemorandum of Association?<\/h2>\n\n\n\n<p>The Companies <strong>Act 2013 under section 4<\/strong><sup><a href=\"https:\/\/www.mca.gov.in\/Ministry\/pdf\/CompaniesAct2013.pdf\"><strong>[1]<\/strong><\/a><\/sup> states the essential contents of the Memorandum. There are few essential clauses that a memorandum contains, and they are specified in detail below.<\/p>\n\n\n\n<ul><li><strong>Name Clause<\/strong><\/li><\/ul>\n\n\n\n<p>The first key content of a memorandum is the <strong>name clause<\/strong>, where the name of the company is mentioned. There are certain conditions that determine what names can or cannot be chosen. The name of the company should not be similar to or identical to any company that is already registered. In the case of a public company, the word &ldquo;Limited&rdquo; must be used necessarily in that name, and in the case of a private company, the word &ldquo;Private Limited&rdquo; must be included with the name.<\/p>\n\n\n\n<div class=\"read\"><p><b>Read, Also:<\/b> <mark><a href=\"https:\/\/enterslice.com\/learning\/process-for-change-of-name-of-company\/\">Process for Change of Name of Company<\/a><\/mark>.<\/p><\/div>\n\n\n\n<p>However, it must be noted\nthat such a condition doesn&rsquo;t apply to Section 8 companies. A section 8 company\nmeans the companies that are established to promote arts, sports, education,\nresearch, social welfare, etc. <\/p>\n\n\n\n<p>A name that is undesirable\nshall not be allowed. Undesirable names are such names that are:<\/p>\n\n\n\n<ul><li>Prohibited under Emblem and Names Act, 1950.<\/li><li>Names that are in resemblance to each other and that are\nselected in order to deceive.<\/li><li>The name that includes a registered trademark.<\/li><li>A name that is offensive or contains any word or words that\nare offensive.<\/li><li>A name that is similar to or resembles the name of already\nincorporated LLP.<\/li><\/ul>\n\n\n\n<ul><li><strong>Registered Office<\/strong><\/li><\/ul>\n\n\n\n<p>Under the registered\noffice clause, the place where the company&rsquo;s registered office is situated\nshall be specified. Such a location of the registered office of a company shall\ndetermine the nationality and the jurisdiction of courts. It is a place where\nstatutory books of the company are kept, and from there, the business is\noperated. In order to communicate with the company, the registered office is\nuseful.<\/p>\n\n\n\n<p>A company may mention the\nstate where the company is located before it is formed, but when it is being\nincorporated or within 30 days after it is incorporated, the details of the\nlocation of the registered office must be clearly mentioned. In case of a\nchange in the registered office clause, the same should be communicated to the\nRegistrar of Companies within the prescribed time. <\/p>\n\n\n\n<ul><li><strong>Object Clause<\/strong><\/li><\/ul>\n\n\n\n<p>Now, the object clause is\nconsidered the most critical clause in the Memorandum of Association. Section\n4(c) of the Companies Act mentions the object clause. Under the object clause,\nthe prime reason behind the incorporation of the company is specified, or the\nactivities to be conducted by the company shall be mentioned. It sets the\nlimits of operation of the company. <\/p>\n\n\n\n<div class=\"read\"><p><b>Suggested Blog:<\/b> <mark><a href=\"https:\/\/enterslice.com\/learning\/procedure-for-change-in-object-clause-of-the-company\/\">Procedure for Change in object Clause of the Company<\/a><\/mark>.<\/p><\/div>\n\n\n\n<p>The objects must be well\ndefined, and the object clause shall contain:<\/p>\n\n\n\n<ul><li>The main objects of the company that the company will aim for\non its incorporation.<\/li><li>The matter that is required to achieve the object of the\ncompany known as the objects incidental or ancillary.<\/li><\/ul>\n\n\n\n<p>The object clause is vital\nfor shareholders as it states the information about the operations that the\ncompany shall perform. It shall allow the shareholders to know the purpose\ntheir investment will be used. Due to the object clause, the company shall be\ndealing with a limited number of matters which will prohibit diversification of\nthe activities of the company. The company also will have to limit itself to\noperate within the scope of powers in the object clause, in case it goes beyond\nsuch scope of powers, then the activity of the company shall be termed as Ultra\nVires. <\/p>\n\n\n\n<ul><li><strong>Liability Clause<\/strong><\/li><\/ul>\n\n\n\n<p>The liability clause in\nthe MOA safeguards the shareholders by providing legal protection from being\nheld liable for any loss in the company. Under the Act, there are two forms of\nlimited liabilities:<\/p>\n\n\n\n<ul><li>A company limited by Shares- under the Companies Act in a\ncompany limited by shares, the shareholders just need to pay for the shares\nthat they have subscribed to. In case of failure to pay such amount and if the\ncompany winds up, then they shall be only liable to pay that unpaid amount.<\/li><li>A company limited by guarantee- under the Companies Act, a\ncompany limited by guarantee consists of members and not shareholders. The\nmembers decide to contribute to the assets of the company when it&rsquo;s winding up.\nThe members guarantee to pay a fixed amount, and they shall be liable for that.<\/li><\/ul>\n\n\n\n<ul><li><strong>Capital Clause<\/strong><\/li><\/ul>\n\n\n\n<p>It is only valid for\ncompanies that have share capital. Such companies must mention the capital\ndivided into shares of a fixed amount. The name and the number of shares that\nthe members have must also be mentioned.<\/p>\n\n\n\n<ul><li><strong>Subscription Clause<\/strong><\/li><\/ul>\n\n\n\n<p>This clause mentions the\nsubscribers who are signing the Memorandum. Every subscriber must mention the\nnumber of shares he subscribes and the signing of the Memorandum by the\nsubscribers must be done on the presence of two witnesses. At least one share\nmust be subscribed by every subscriber. <\/p>\n\n\n\n<ul><li><strong>Association Clause<\/strong><\/li><\/ul>\n\n\n\n<p>In the association clause, the\nsubscribers make a declaration of association with the company. It is also a\nvital clause as it contains the particulars of the shareholders or the\npromoters of the company. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Subscription of MOA<\/h2>\n\n\n\n<p>The first shareholders of a company\nare called subscribers. They come together and form a company. Thus, their\nnames and their other relevant details are mentioned in the Memorandum.<\/p>\n\n\n\n<p>The requirement of subscribers would\nbe different from company to company. It all depends on the type of company.<\/p>\n\n\n\n<p>For a private company, a minimum of 2\nsubscribers are required to form a company, and for public companies, 7 or more\nsubscribers are needed. When it comes to one Person Company, then as the name\nitself suggests, only one person is required.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Signing of the Memorandum of\nAssociation <\/h2>\n\n\n\n<p>The Memorandum should be signed by\nall the subscribers. Along with the signature, the subscriber must mention\nother relevant details like his name, address, occupation, and the shares he is\nsubscribing to. It must be done in the presence of a minimum one witness. The\nwitness shall also give his details.<\/p>\n\n\n\n<p>Further, the Memorandum should be in\nprinted form under the Companies Act, 2013.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Alteration in the Memorandum of\nAssociation under Companies Act, 2013<\/h2>\n\n\n\n<p>Alteration means any change in the existing thing. From the purpose of the MOA, alteration means any addition, substitution or omission to the Memorandum. The company has the right to <strong><a href=\"https:\/\/enterslice.com\/learning\/procedure-for-change-in-alteration-of-moa-and-aoa\/\">alter the Memorandum<\/a><\/strong>, but it is only limited to an extent permissible under the Act. Any alteration in the clauses can be made after passing a special resolution.<\/p>\n\n\n\n<p>The resolution is a term used to\ndenote a formal decision made in a meeting. A special resolution requires a 2\/3<sup>rd<\/sup>\nmajority. The alteration is a critical undertaking that can happen for\ndifferent reasons. It may be to enable the company to work more efficiently or\nto amalgamate with any other company. It can also be altered to achieve the\nobjectives or to help companies dispose of the undertaking. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\">How can different clauses under\nthe MOA be altered?<\/h2>\n\n\n\n<p>The clauses of the Memorandum of Association\ncan be altered in different ways depending upon the clauses. Name clause can be\naltered after a special resolution is passed. Thereafter, the copy is sent to\nthe Registrar. Once it is changed, a new certificate shall be issued. <\/p>\n\n\n\n<p>Alteration in the registered office\nclause requires the approval of the central government. An application can be\nfiled along with the prescribed fee for such a change. The object clause can be\naltered after passing a special resolution. In case the company is a public\ncompany, then the alteration of the Memorandum should be published in the local\nnewspaper under the jurisdiction of the registered office of the company.<\/p>\n\n\n\n<p>Alteration in the capital clause can\nbe achieved by passing an ordinary resolution. The altered Memorandum must be\nprovided to the Registrar in 30 days after the resolution is passed.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Difference between Articles of\nAssociation and Memorandum of Association (MOA)<\/h2>\n\n\n\n<ol><li>An Article of Association\nregulates the internal affairs of the company; in contrast, the MOA deals with\nthe relationship of the company with the outside world.<\/li><li>An Article of Association\ncontains all the rules of the company, whereas the MOA consists of the objects\nof the company.<\/li><li>In case where alteration\nis required in the Article of Association, approval from the Central Government\nis not required, but MOA requires such approval.<\/li><li>An act that is ultra vires\ncan be made legitimate under Article of Association through ratification of\nshareholders, but it is not possible in the MOA.<\/li><li>The forms of Article of Association\ncan be found in Tables F to J of schedule 1, whereas the Forms of MOA are in\nTables A to E of schedule 1. <\/li><\/ol>\n\n\n\n<h3 class=\"wp-block-heading\">Conclusion<\/h3>\n\n\n\n<p>\n\nThe Memorandum of Association is an essential\nlegal document for the incorporation of a company. It is the foundation upon\nwhich a company is formed. Every company must have it. <strong>An MOA can serve as guidance to shareholders, creditors, etc. about the\nactivities of a company. Therefore, it must be well-drafted by seeking the\nadvice of a professional because you don&rsquo;t want to take a chance with or be\ncomplacent with such an indispensable document.<\/strong><\/p>\n\n\n\n<div class=\"read\"><p><b>Read, Also:<\/b> <mark><a href=\"https:\/\/enterslice.com\/learning\/stamp-duty-memorandum-association-india\/\" target=\"_blank\" rel=\"noopener noreferrer\">Stamp Duty on Memorandum of Association in India<\/a><\/mark>.<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"<p>A company is made when a certain group of people come together to achieve a particular objective. Usually, such an objective is commercial in nature that allows them to make financial profits. There are a number of steps that must be followed to form a company. An application is filed with the Registrar of Companies [&hellip;]<\/p>\n","protected":false},"author":35,"featured_media":31447,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[2369,1527],"tags":[940],"acf":{"service_id":"272"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v14.6.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>An Analysis on Memorandum of Association under the Companies Act<\/title>\n<meta name=\"description\" content=\"Memorandum of Association is An application is filed with the Registrar of Companies, and that application is enclosed along with a number of documents.\" \/>\n<meta name=\"robots\" content=\"index, follow\" \/>\n<meta name=\"googlebot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta name=\"bingbot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/enterslice.com\/learning\/an-analysis-on-memorandum-of-association-under-the-companies-act\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"An Analysis on Memorandum of Association under the Companies Act\" \/>\n<meta property=\"og:description\" content=\"Memorandum of Association is An application is filed with the Registrar of Companies, and that application is enclosed along with a number of documents.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/enterslice.com\/learning\/an-analysis-on-memorandum-of-association-under-the-companies-act\/\" \/>\n<meta property=\"og:site_name\" content=\"Enterslice\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/enterslice\" \/>\n<meta property=\"article:published_time\" content=\"2020-04-27T08:09:13+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-09-05T10:42:54+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2020\/04\/A-Critical-Analysis-on-Memorandum-of-Association-under-the-Companies-Act-2013.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"670\" \/>\n\t<meta property=\"og:image:height\" content=\"352\" \/>\n<meta name=\"twitter:card\" content=\"summary\" \/>\n<meta name=\"twitter:creator\" content=\"@enterslice\" \/>\n<meta name=\"twitter:site\" content=\"@enterslice\" \/>\n<!-- \/ Yoast SEO plugin. -->","authorName":"Ashish M. Shaji","authorImageUrl":"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2020\/10\/04.jpg","authorDescription":"Ashish M. Shaji has done his graduation in law (BA. LLB) from CCS University. He has keen interests in doing extensive research and writing on legal subjects especially on corporate law. He is a creative thinker and has a great interest in exploring legal subjects.","postViews":800,"readingTime":8,"nextPost":{"id":31441,"slug":"what-are-the-factors-affecting-corporate-governance-in-india"},"prevPost":{"id":31429,"slug":"potential-impact-of-mega-bank-mergers"},"featuredMediaUrl":"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2020\/04\/A-Critical-Analysis-on-Memorandum-of-Association-under-the-Companies-Act-2013.jpg","postTerms":"Compliances","_links":{"self":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/posts\/31442"}],"collection":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/users\/35"}],"replies":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/comments?post=31442"}],"version-history":[{"count":0,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/posts\/31442\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/media\/31447"}],"wp:attachment":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/media?parent=31442"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/categories?post=31442"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/tags?post=31442"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}